November 27th, 2012

How Guy Carpenter Can Help: Catastrophe Risks in Developing Economies

Posted at 1:00 AM ET

David Flandro, Global Head of Business Intelligence, Julian Alovisi, Assistant Vice President and Lucy Dalimonte, Senior Vice President
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Guy Carpenter is uniquely positioned to help clients successfully grow their business in emerging markets. Our GC Global Analytics and Advisory team offers services and solutions that include industry-leading risk analytics, strategic and technical advice and capital advisory. We employ over 300 modeling, actuarial and advisory professionals through our GC Analytics®**, Global Advisory and GC Securities* teams who closely collaborate with Guy Carpenter’s global broking force to deliver the best insights and growth opportunities to our clients. We encourage you to contact your Guy Carpenter representative to review and discuss your modeling, advisory and capital needs in more detail. Among the specific services and tools we utilize and offer are proprietary modeling, the i-aXs® data management platform, MetaRisk®, portfolio management, predictive analytics, advisory services and actuarial expertise.

Guy Carpenter Proprietary Modeling

Guy Carpenter’s Model Development Team, established in 2004, has developed a number of industry-leading proprietary catastrophe models for perils or regions where no other models exist, or where market-wide modeling technology is still not as advanced as Guy Carpenter’s proprietary alternatives. In Asia, Guy Carpenter has long recognized the potential for significant flood losses. This led to the development of a flood model for Thailand in 2008. Flood modeling capabilities have now been extended to the Indonesian capital city of Jakarta and many urban areas in India. Solutions for other emerging countries are currently being developed.

In addition to the modeling of natural perils, GC Analytics has acquired expertise in modeling man-made catastrophes. This is accomplished through both the use of commercial modeling platforms and the development of proprietary tools. The wide range of services offered covers the assessment of man-made events for conflagration, terrorism, casualty events, pandemic events that may hit a life portfolio and marine cargo accumulations.

i-aXs®

Guy Carpenter’s i-aXs data management platform provides a full suite of tools to help insurers translate their data instantly, allowing for faster and better informed decisions. The award-winning platform integrates sophisticated data analysis systems, cutting-edge technology and satellite imagery to provide more efficient management of exposure and loss data. i-aXs can assist clients based in markets where no catastrophe models exist through its state-of-the-art hazard maps, advanced data mining capabilities and real-time catastrophe information.

i-aXs allows users to select dozens of standard reports or create custom views of their data. Exposure reports illuminate how and where policies are being written, while a loss output view outlines what the models indicate about client exposures. Past and present data can be compared with ease, facilitating a web-enabled data warehouse that users can access 24 hours a day, seven days a week. Clients can also visualize their geographic data with our integrated mapping platform so data can be transformed into fully interactive maps.

i-aXs can also assist insurers with accumulation management issues. Its unique accumulator tool calculates concentrations of exposure for perils such as wind, hailstorm and earthquake. Unlike other accumulation tools, output is instantly generated in both map and grid formats. Thematically shaded maps and satellite imagery, along with user-friendly reports, provide detailed accumulation information within a user-defined geographic range.

From an underwriting perspective, i-aXs helps clients assess new locations and combine them with existing portfolios to obtain estimates of probable maximum loss and average annual loss. RealCat (Patent #7,949,548) reports, meanwhile, assist users in monitoring and evaluating potential losses to a portfolio as an event is unfolding. RealCat covers several perils, including hurricanes, earthquakes, wildfires and floods. By combining satellite imagery with streaming radar data showing precipitation bands, wind speeds and other related details, clients are able to track the potential impact of an event on locations in their portfolios.

MetaRisk® - Capital Model Implementation (Partial or Full)

MetaRisk is Guy Carpenter’s proprietary stochastic reinsurance and capital modeling platform. It is a uniquely powerful, flexible and transparent solution that enables us to model clients’ entire portfolios rapidly, accurately and reliably. MetaRisk provides a realistic way of modeling reserve risk, which reflects (re)insurers’ own reserving practices. By building a parallel version of a client’s underwriting risk model (gross losses, ceded premium and ceded losses) in MetaRisk, we can undertake comprehensive validation and sensitivity testing. MetaRisk employs sophisticated algorithms that most closely replicate the treatment of secondary uncertainty by RMS so that the platform’s estimation of extreme losses, for example, 1-in-200-year events, is nearly exactly the same as that produced by the actual vendor model.

MetaRisk’s simulation speed empowers carriers to compare any desired metric for multiple alternative selections for loss frequency and severity. Consequently, they can sensitivity-test their original assumptions around loss ratio, premium growth, underwriting cycle and inflation.

MetaRisk is also able to simulate clients’ underwriting risk (losses and reinsurance) with a sufficient number of simulations within a relatively short timeframe. This allows an assessment of the impact of potential simulation error within the main capital model on key extreme scenarios, such as the 1-in-200-year underwriting result.

Portfolio Management

Guy Carpenter offers multiple tools for clients that are looking to implement portfolio management and ERM strategies. Our tools focus on both natural and man-made catastrophes, and we work with clients to tailor the right short-term and long-term solutions.

A key element of portfolio management is the alignment of a firm’s capital management framework with catastrophe modeling output, so returns can be targeted down to the county, postal code or even location level. With this information, a firm can re-underwrite the “worst offenders” in the existing portfolio and target new areas for growth according to defined performance metrics. The portfolio management process is pursued through data management, portfolio assessment and portfolio optimization.

Predictive Analytics

The fact that the property and casualty (P&C) markets are oversupplied, combined with incorrectly priced portfolios, makes adverse selection a feature of every portfolio. Until now there has been no way to detect and measure this despite the fact that the entire industry has been aware of the issue. Guy Carpenter has partnered with EagleEye Analytics so our customers can utilize the power of the technological breakthroughs embodied in EagleEye’s Talon product. Talon can help customers improve risk selection, lower operating costs, optimize capital and grow more profitably.

Range of Customized Advisory Services

Guy Carpenter offers deep advisory expertise in areas that many clients will find useful to evaluate their risk exposure. Our advisory teams offer a wealth of expertise in ratings, risk management, reinsurance and capital markets, enabling us to provide technically credible and practical advice and solutions. We assist clients in their interaction with regulators and all of the major rating agencies, offering a range of services that include risk-based capital analysis, peer and composite review, ERM assessments and presentation preparation and review. These services are supported by further offerings including capital advisory, strategic advisory, reserve risk modeling and reinsurance counterparty risk advisory.

GC Securities* is a licensed broker dealer delivering a full spectrum of capital solutions, including index-based risk transfer, insurance linked securities structuring and placement, mergers and acquisitions, collateralized reinsurance, debt, equity and hybrid financing. GC Securities is fully integrated with Guy Carpenter’s industry leading modeling, actuarial and advisory teams and works in close collaboration with our global broking network to source unique opportunities to help clients build sustainable growth.

Actuarial Expertise

GC Analytics’ expertise and industry leading modeling proprietary software can help carriers parameterize their portfolios, supplement their existing data with more from the industry and enhance model performance through additional technical knowledge and capabilities. GC Analytics teams can also propose a number of tailor-made solutions to assist (re)insurers with their implementation of regulatory legislation such as Solvency II. These solutions are targeted and specific, ensuring that they are achievable and deliver measurable value.

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* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of an offer to buy any security, financial instrument, reinsurance or insurance product. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

**GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

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